Jordan Wealth Management Group - ScotiaMcLeod Truro

We continue to see a tug of war between the optimists and the "perma-bears", and we have already seen the markets pricing in the next round of quantitative easing by the States. Many countries are jockeying to devalue their currencies to make their exports more competitive, and gold and other hard assets are soaring in demand as a result. There will likely be a day of reckoning for the price of these assets, but when and from what level?

We are once again in the beginning innings of earnings season again, which will send important signals as to whether markets are perceived as fairly priced at this time or not.

Some of the challenges I am dealing with now in finding safe havens to invest my client’s money in is that because interest rates are so lousy, everyone is forced to invest in riskier than usual asset classes. GIC investors are having to look at Corporate bonds, debentures, ETF’s and the like to get a higher rate. Some utility stocks are hitting all-time highs and are offering some of their lowest effective dividend yields because people are still attracted to them because a 3-4% dividend is still a lot better after tax than a 2.5% GIC. It has been great for my clients that bought these things in the last 18 months or so – good capital gains as a result of global interest rate expectations going nowhere but down; but it is getting harder to put new money to work. It feels like the ‘easy money’ has been made for a while on investments that trade based on what they yield.

This is not to say that the game is up however. We should be in good shape with these investments if and until we get a swift rise in interest rates. If this happens, then the ideal dividend stock will be those companies that are being profitable enough to be able to increase their dividends to stay competitive. If rates rise because the economy is on the mend, then corporate bonds and the like will be less risky, and their prices will hold up better – at least for the shorter maturities. When the economies of the world work their way through the current mess and start to grow again – other opportunities will appear.

On an aside note, something I see as a possible blessing from the Bank of America temporarily halting foreclosures of houses, because of shoddy legal documentation, is that this could help stabilize housing prices in the States for a while. Too many houses were coming to market at the same time. This reprieve will allow the existing foreclosures already processed to get cleaned up before the next round, hopefully stemming the downward spiral that has not seemed to want to stop.

In closing, I remind you that it is best to maintain a longer-term focus and a disciplined investment plan to manage through these turbulent times. Please call or email me if you have any questions or concerns.